G.R. No. L-8976, December 2, 1914
GUTIERREZ HERMANOS, plaintiff-appellant, vs. NARCISO ALEGRE and CRISTOBAL MARCOS, defendants-appellants.

FACTS:
On September 16, 1909, Gutierrez Hermanos obtained a judgment against Cristobal Marcos for P19,117.26 in the Court of First Instance of Sorsogon. In March 1910, an execution was issued, and various properties of Marcos were attached, including a herd of cattle. Before the sale of the attached properties, Narciso Alegre filed a third-party claim with the sheriff, asserting ownership of the cattle. Consequently, the cattle were released and delivered to Alegre. The other attached properties were sold at public auction, yielding P5,373, leaving a balance of P13,744.26 unsatisfied on the judgment.

Gutierrez Hermanos then filed the present action, alleging that the sale of the cattle by Marcos to Alegre was simulated and fraudulent, executed to defraud creditors. The plaintiff sought a declaration that the cattle belonged to Marcos, that the sale was void, and that the cattle be subjected to execution. Alternatively, if the cattle could not be recovered, they demanded a joint and several judgment against both defendants for the value of the cattle.

The defendants demurred, which was overruled. In their answer, they asserted that the sale was bona fide, for valuable consideration, and that Marcos was solvent at the time of the sale. Alegre also counterclaimed for P3,000 in damages due to the alleged unlawful attachment.

After trial, the lower court absolved the defendants and ordered the plaintiff to pay Alegre P1,800 or return the lost cattle, plus costs. Gutierrez Hermanos appealed.

ISSUE:
Whether the sale of the cattle by Cristobal Marcos to Narciso Alegre was valid and effective to transfer ownership, such that the cattle were rightfully excluded from the execution against Marcos’s property.

RULING:
The Supreme Court REVERSED the judgment of the lower court.

The Court held that the sale was invalid and ownership of the cattle had not passed to Alegre at the time of the attachment, for two principal reasons:

1. Non-compliance with Act No. 1147: Section 22 of Act No. 1147 (enacted May 3, 1904) provided that “No transfer of large cattle shall be valid unless registered, and a certificate of transfer secured as herein provided.” Citing its precedent in Ramos vs. Hijos de I. de la Rama (15 Phil. Rep., 554), the Court ruled that without such registration and certificate, ownership does not pass, and the cattle may still be attached as property of the vendor. The record showed that the cattle were not marked or branded until June 1911long after the judgment, execution, and even the filing of the present actionand there was no evidence of proper registration at the time of the alleged sale (August 1909) or the attachment (March 1910).

2. Indicia of a Simulated Sale: The Court noted additional facts strongly suggesting the sale was simulated: (a) the actual transfer of possession occurred on August 18, 1909, long after the alleged sale date claimed by the defendants; (b) the books of the parties contained no contemporaneous record of the transaction; and (c) the sale price was considerably below market value.

Therefore, since the sale was invalid for non-registration and appeared fraudulent, Cristobal Marcos remained the owner of the cattle when they were attached. Alegre had no right to secure their release. The plaintiff was entitled to have the cattle sold under execution.

The Supreme Court decreed:
1. Cristobal Marcos was the owner of the cattle at the time of attachment.
2. The cattle are subject to the execution issued in the prior case.
3. If any of the cattle cannot be subjected to execution due to the defendants’ acts, a judgment for their value shall be rendered against the defendants after a proper hearing.

No costs were awarded.